I recently spoke at a law school class addressing current events in criminal law. The topic of the day was sentencing for “white collar” criminals — perpetrators of financial crimes like securities fraud and insider trading. We looked at the recent sentences handed out to white collar defendants – 15 years, 20 years, and 25 years — and I asked the students if they thought that sentences measured in decades were appropriate for non-violent first offenders. Is there something wrong with the federal sentencing regime, I asked, when fraudsters routinely receive longer sentences than violent criminals?
To my surprise, most of the students said that they had no problem with white collar defendants getting longer sentences than almost any other class of criminal. The students felt — as does the United States Sentencing Commission and the majority of federal judges — that a major financial fraud does more damage to society than an isolated violent crime. After class, one student even confided that he was once the victim of a home invasion, and believed that the perpetrator deserved less jail time than the average white collar defendant.
The students, as a group, believed that Marc Dreier got exactly the sentence that he deserved for his colossal $700 million fraud: 20 years.
For years, white collar criminals routinely received a “slap on the wrist” — sentences of probation, or at worst a prison term measured in months, not years. The current sentencing regime is a reaction to that, and to the damage that major fraudsters do to the economy. Without a doubt, they erode people’s faith in the financial system. When people fear that they’re investing in a scam, they’re a whole lot less likely to invest at all. In the wake of corporate scandals at Enron, World Com, Tyco and Global Crossing, there’s little doubt that serious corporate crime warranted serious sentences that could deter future fraud of that magnitude.
But are white collar fraudsters really the worst of the worst? Before Dreier’s sentencing, we argued to United States District Judge Jed S. Rakoff that something was broken with the system. The federal sentencing guidelines, which judges are required to consider, recommended that Dreier receive a sentence of 145 years of imprisonment. This was based on an enhancement for fraud loss of more than $400 million that is exactly double the enhancement for, for example, “willfully boarding an aircraft with a dangerous weapon or material without regard for the safety of human life” or “trafficking, receiving or possessing a portable rocket, missile or launcher.” The enhancement is more than double the enhancement for a “felony involving or intending to promote terrorism.”
We knew that Judge Rakoff might be sympathetic to our policy arguments. In connection with another defendant’s sentencing, he noted the harm that can result if the federal sentencing guidelines for white collar defendants are “not cabined by common sense.” He also noted the “considerable evidence that even relatively short sentences can have a strong deterrent effect on prospective white collar offenders.” (Another highly respected federal judge, Senior United States District Judge Frederic Block, once described the sentencing guidelines for white collar crimes as “a black stain on common sense.”) In the end, however, we couldn’t overcome the current sentencing climate that considers a two-decade sentence reasonable in a white collar case.
Leaving court after Dreier’s sentencing, we received calls from other attorneys congratulating us on Dreier’s 20 year sentence. Without exception, they expected Dreier to receive a longer term – at least 25 years, if not 30 or more. After all, he was sentenced only weeks after Bernie Madoff received an unprecedented 150 years for his own colossal fraud.
While we appreciated the sentiment, we couldn’t help but feel — as lawyers and as citizens — that proportionality in sentencing has somehow been lost in the war on white collar crime.
Editor's Note: Ross Kramer is an associate at the Law Offices of Gerald Shargel. Along with Gerald Shargel, Mr. Kramer represented Marc Dreier in his criminal case and at his sentencing.
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